The key quote: Exactly what Yellen said on Friday
ForexLive Americas FX news wrap: Yellen says a hike is probably coming
Forex news for US trading on May 27, 2016:
- Fed's Yellen: Hike probably appropriate "in the coming months"
- Q1 2016 US GDP second estimate 0.8% vs 0.9% exp q/q ann
- Striking Verizon workers reach deal -WSJ
- Baker Hughes US rig oil count 316 vs 318 prior
- New York Fed boosts Q2 GDP forecast to 2.2% from 1.7%
- Canada reports a jump in March deficit to narrowly avoid fiscal year surplus
- May final U Mich consumer sentiment 94.7 vs 95.4 expected
- Germany closely monitoring Chinese investment activity - report
- Russian oil minister says market rebalancing forces beginning to work
- CFTC Commitments of Traders: Dollar bulls return, AUD longs bail
Markets:
- S&P 500 up 9 points to 2099
- Gold down $8 to $1212
- WTI crude down 20-cents to $49.49
- US 2-year yields up 4 bps to 0.91%
- USD leads, EUR lags
Most
people thought Yellen's appearance on Friday would be a dud but she
delivered a clear-ish message that a rate hike is coming.
"It's appropriate, and I've said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate," Yellen said.
Much of the market had cleared out for the week but there were plenty of USD buyers that stepped in afterwards.
Earlier in the day, USD/JPY hit a session low of 109.48 after the soft GDP numbers but rebounded quickly and continued to climb ahead of Yellen. It was at 109.95 when the headines hit and broke through the big figure and up to 110.47 before offers at 110.50 halted the advance. The pair finished at 110.30.
EUR/USD was in a funk long before Yellen arrived. The pair took out 1.1150 early in US trading and then ran stops down to 1.1126. Support there from the 61.8% March-April rally and the weekly low sparked some dip buying up to 1.1150 but Yellen led to fresh session lows and a close at 1.1109. The 200-day moving average is just below.
Cable also finished on the lows at 1.4616. It was swept up in the general US dollar strength but held up better than other currencies. Generally, there was a chop between 1.4610 and 1.46500 but the bears eventually won out.
AUD/USD staggered into the close and lost 40 pips on the day. Steady selling began from 0.7222 at the start of USD trading down to a low of 0.7172. There is still quite a few levels to take out before the May low of 0.7145 but early next week will be interesting.
USD/CAD didn't feel the brunt of the dollar move. Alberta oil is beginning to come back online and the market, I think, wants to see how that plays out. USD/CAD tried the upside early and hit 1.3069 but oil found a bid and it sagged to 1.3015 even after Yellen delivered the hawkish comments.
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The wording wasn't the most elegant but the meaning was clear
"It's appropriate, and I've said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate," Yellen said on Friday.
Other key quotes:
"The economy is continuing to improve."
"We saw weak growth in the first quarter of the year, and relatively weak growth at the end of last year," she said. "The growth looks to be picking up from the various data that we monitor."
"If we were to raise interest rates too steeply and we were to trigger a downturn or contribute to a downturn, we have limited scope for responding, and it is an important reason for caution."